Making sense (and, sometimes, nonsense) out of Current News, Issues, Politics

Wednesday, September 24, 2008

OPEC's Short-Term Vision

Just recently, OPEC decided to cut production to keep oil prices high. The reason is simple: OPEC countries like Saudi Arabia, Iran, and Venezuela, have become accustomed to the mammoth cash inflows they have been getting into their government coffers for high oil prices. Many are still working off the cost to sink an oil well in the 1970's; so, profits can be as high as 800% on a barrel of oil.

But, OPEC's greed will ultimately hurt them. It will hurt them more than consumer actions that were taken following the Arab Oil Embargo of 1973 when small cars became the rage and the demand and price of oil fell dramatically. It hurt them more because, this time, the West won't just cut back on oil usage with more fuel efficient cars. This time, the West will walk away from oil completely as the consumer decides to find other ways to avoid four dollar a gallon, or higher, gasoline prices.

OPEC might not realize it but, this could be the beginning of their end. This country, and the world, has already started moving away from oil for its energy needs. People are buying more fuel efficient automobiles such as hybrids. Expect offshore drilling to become a reality. Electric cars like the GM volt and the Chrysler "EV's" are scheduled to appear on the market by 2010. Wind and solar are getting attention. Hydrogen vehicles are closer than ever in being a reality. And, yes, we might even build a Nuclear power plant our two!

It is possible, that within one or two decades, OPEC will see the demand for oil fall off dramatically. We could do it if we do "all those" things that will cut into this country's "imported" oil demand; including drilling for our own new oil reserves. We could be the leader that the world will follow in becoming energy independent. In doing so, we will become more secure because we would no longer be dependent on our enemies for oil. We won't be sending $700 billion a year to our enemies military coffers. But, most importantly, we can watch the only economic base that many of our enemies have, oil production, just wither away from below their feet.